Willkie Assists Momentive Performance Materials in Successful Restructuring

On October 24, 2014, Momentive Performance Materials, Inc. and its affiliates (“MPM”) successfully consummated its prenegotiated plan of reorganization and exited from bankruptcy just six months after its bankruptcy filing.  Willkie led the complex representation of MPM, a maker of silicone and quartz products, and 11 of its affiliates in connection with their chapter 11 bankruptcy cases before the Honorable Robert D. Drain in the United States Bankruptcy Court for the Southern District of New York.  Prior to its filing, Willkie led the negotiation and documentation of MPM’s prenegotiated plan of reorganization, which had the support of approximately 90% of its second lien noteholders.  The restructuring resulted in the elimination of more than $3 billion of debt from MPM’s balance sheet.  Willkie successfully represented MPM in heavily contested hearings including a one-week trial with respect to the confirmation of its proposed Plan of Reorganization.  On August 26, 2014 in a four-hour-long bench ruling, Judge Drain ruled in favor of the Debtors on every contested point.  Among other rulings, Judge Drain approved the cramdown  provisions of the Plan applying the Supreme Court’s decision in Till to award a below-market rate of interest on replacement securities for senior lenders, in a decision that  may have repercussions in many future restructurings.  Trustees for certain of the Company’s debt issuances have appealed Judge Drain’s decision to the District Court for the Southern District of New York.

The matter was primarily handled by partners Matthew Feldman, Rachel Strickland, Joseph Baio, Roger Netzer, James Dugan, William Hiller, Henry Cohn and Cristopher Greer; special counsel Ajanaclair Lynch; associates Jennifer Hardy, Theodore Neos, Dan Kozusko, Ji Kim, Andrew Mordkoff, Christopher Koenig, Nicole Naples, Veronica Ng, Joseph Antignani, Stephen Mouritsen, Alexis Anzelone, Kevin Brown and William O’Brien.

Firm Obtains Victory for Citigroup Directors in LIBOR Shareholder Derivative Action

On October 14, Justice Jeffrey Oing of the Commercial Division of the New York Supreme Court issued an order in Zucker v. Rubin dismissing with prejudice breach of fiduciary duty claims against the Board of Directors of Citigroup Inc. for allegedly failing to prevent manipulation of the London Interbank Offered Rate, commonly known as LIBOR.  Willkie represented Citigroup’s independent directors in the lawsuit.

Plaintiff Lawrence Zucker filed suit in June 2011 against certain current and former directors of Citigroup, alleging that they must have known about, but nevertheless disregarded, a litany of news articles and other reports suggesting that Citigroup had conspired with other banks to suppress U.S. Dollar LIBOR.  According to the complaint, these media reports constituted “red flags” of wrongdoing that triggered a duty on the part of the Board to act.  Because the Board ignored those warnings, the plaintiff alleged, the directors faced a substantial likelihood of liability for breaching their duty of oversight and the plaintiff was therefore excused from his obligation to make a pre-suit demand.  Nearly two years later, plaintiff filed an amended complaint, adding allegations that Citigroup must have been engaged in rate manipulation because other banks had entered into settlements with various regulatory agencies around the world in which they admitted to wrongdoing and agreed to pay regulatory fines.  Defendants moved to dismiss.

In an unusual twist, during the period between plaintiff’s original and amended complaints, another Citigroup shareholder commenced a derivative action in the New York Supreme Court, Shaev v. Pandit, which also alleged that the directors of Citigroup were personally liable for failing to prevent LIBOR from being suppressed.  Unlike the Zucker action, however, the plaintiff in Shaev did not allege that she was excused from making a pre-suit demand on the Citigroup Board before filing suit.  Instead, she alleged that the demand requirement had no application at all under New York State banking law.  In January 2014, the court dismissed the Shaev complaint, reasoning that the plaintiff’s banking law theory was without merit and that, because the plaintiff had failed to plead demand futility, she lacked derivative standing to bring the suit.

In support of defendants’ motion to dismiss Zucker’s amended complaint, the Willkie team argued that he failed to plead demand futility with the particularity required by law and, independently, that Zucker was precluded from bringing suit because he, like Shaev, purported to sue on Citigroup’s behalf and thus was bound by the Shaev result. The court agreed, holding that Zucker had failed to plead facts sufficient to excuse demand and that, since the real party in interest in both cases was Citigroup, he was barred on the basis of res judicata and collateral estoppel from re-litigating claims that Shaev had already advanced and lost.

The case was handled by partners Mary Eaton, Todd Cosenza and Sameer Advani, and associates Zheyao Li, and Lars Hulsebus.

Prudential Announces $1.4 Billion Pension Risk Transfer Transaction with Bristol-Meyers Squibb

Willkie recently advised Prudential in its $1.4 billion pension risk transfer transaction with Bristol-Myers Squibb Co.  The transaction, which was announced on September 30, 2014, comes on the heels of the September 25 announcement of the pension risk transfer transaction between Prudential and Motorola Solutions.  Read Willkie’s Announcement.  Under the terms of this transaction, Bristol-Meyers Squibb has agreed to purchase a group annuity contract from The Prudential Insurance Company of America that will transfer to Prudential responsibility for the administration and payment of $1.4 billion of retirement benefits to approximately 8,000 Bristol-Meyers Squibb retirees. The transfer to Prudential is expected to occur in December 2014 and is subject to satisfaction of closing conditions.

The Prudential Insurance Company of America is the principal subsidiary of Prudential Financial, Inc., a financial services leader with more than $1.1 trillion of assets under management as of June 30, 2014 and operations in the United States, Asia, Europe and Latin America. Through its subsidiaries and affiliates Prudential Financial offers a wide array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management, to individual and institutional customers through one of the largest distribution networks in the financial services industry.

The matter was handled by partner Vladimir Nicenko and associates Christian Ercole and Patrick Tedesco.  Partner Donald B. Henderson, Jr. assisted on insurance regulatory matters.